Bangladesh needs to continue structural reform: ADB
Bangladesh needs to continue its programme of structural reform toward fiscal strengthening through revenue mobilization and improved public finance management, pointed ADB in its report-Economic trends and prospect in developing Asia: South Asia.
The FY2016 budget targets a 29.5 per cent increase in tax revenue that would lift the tax-to-GDP ratio by 1.3 per centage points to 10.6 per cent, bringing total revenue to 12.1 per cent of GDP, the ADB report added.
As the implementation of the new value-added tax law has slipped by a year to 1 July 2016, and as tax relief has been broadly granted, it will be very difficult to achieve the targeted growth in tax collection that substantially exceeds nominal GDP growth.
Total budget expenditure, including current spending and the annual development program, is slated to grow by 23.1 per cent to equal 17.2 per cent of GDP, but achieving this large increase will also be problematic, the statement said.
While progress is expected toward fully implementing the budget, shortfalls will be likely on both sides of the ledger, as in previous years. Budget execution will hold the deficit to no more than 5 per cent of GDP, as planned, but introducing the new value-added tax at the start of FY2017 would be a crucial step toward implementing the reform agenda and creating the fiscal space needed to step up infrastructure spending and support growth, according to the ADB report.
The central bank indicated in its latest monetary policy statement, issued in July for the first half of FY2016, that it would continue a cautious but pro-growth monetary policy that supports the governments growth objective and inflation target. While inflation has fallen almost to 6 per cent, it remains at the high end of the banks comfort zone. Given the upward trend in nonfood inflation, the central bank kept the repo rate unchanged at 7.25 per cent.
The policy statement set the growth 3.2.9 current account components target for broad money at 15.6 per cent, which is meant to take into account productive credit needs in both the public and the private sector.
